Local government councils in England are facing a growing financial gap that could lead to cuts in services across towns and cities due to inflation exacerbating an existing funding shortfall, according to the Local Government Association (LGA). The representative body has warned that England’s local councils are collectively £4 billion short of what they need to maintain current service levels over the next two years. This estimated gap has increased by a third from £3 billion in July, following updated national inflation forecasts.
This latest warning comes after the city of Birmingham, the largest local authority in Europe, effectively declared bankruptcy last month, stating that its income was insufficient to cover costs. The LGA has said that no council is immune from financial difficulties and that some are on the verge of following Birmingham into effective bankruptcy.
The financial strain faced by cash-starved councils has contributed to the perception of decaying public services in the UK, particularly in a year marked by strikes and the discovery of crumbling concrete in buildings such as schools.
Local authorities rely on council tax to finance a range of services, including waste collection, fire and public safety, libraries, and social care. However, the LGA argues that council tax increases are not a viable solution to raising more money during a cost-of-living crisis. Instead, they are calling on finance minister Jeremy Hunt to provide additional funding in the government’s autumn budget update next month.
The LGA, which represents nearly all of England’s 317 elected local authorities, has highlighted that councils have seen a 27% real-terms cut in core spending power since 2010, when the British government began its austerity drive in response to the global financial crisis. This has left councils struggling to maintain services amidst rising costs and increasing demands.
The impact of these financial pressures on local councils is significant, as they are responsible for delivering essential services to communities. The LGA’s warning serves as a stark reminder that the current financial climate is putting immense strain on local authorities, potentially resulting in cuts to vital services. As the government prepares to announce its autumn budget update, many will be watching closely to see if additional funding will be provided to address the growing gap in council finances.
More detail via Reuters here… ( Image via Reuters )